REAL ESTATE: Apartment market is on hold

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Sherrie Mares, property director at Stonegate at Towngate apartments in Moreno Valley, talks with prospective renters Ashley Perez and David De La Macha about the different options in the one-bedroom apartment.

Isaiah Mayne, a professional personal trainer, helps Aiyana Davison do her workout in the gym at Stonegate at Towngate apartments in Moreno Valley. Mayne does private training like this three times a week at the apartments, which is free to residents.

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Sherrie Mares, property director at Stonegate at Towngate apartments in Moreno Valley, goes over the canceling of a lease with a family who bought a house and need to move before their lease ended.

Sherrie Mares, property director at Stonegate at Towngate apartments in Moreno Valley, shows prospective renters David De La Macha and Ashley Perez the master bedroom in a one-bedroom apartment.

Anyone looking for an apartment in Inland Southern California these days has to make a decision based on a lot of economic what-ifs and maybes.

Will the job situation improve at a pace similar to the fourth quarter of last year, or will growth slow the way it has in March and April? Will some semblance of stability come to the residential housing market? And people who have already been burned by the housing collapse of 2007 and 2008 are still stuck in bad-credit hell.

It adds up to an apartment market loaded with uncertainties for Riverside and San Bernardino county renters, and that has probably been compounded by an economy that appears to be stagnating this spring.

In its first-quarter report, commercial real estate firm Marcus & Millichap predicted vacancy rates would decline in 2012 and rents would increase. With new employment opportunities opening up in the Inland area during the second half of 2011 and the winter of this year, it was anticipated that more people would be able to afford their own apartments.

That appeared to be true, at least in the first quarter. The vacancy rate fell to 4.5 percent, down from 6 percent a year earlier and sharply lower than the recession-peak of about 8.4 percent in 2009, according to Marcus & Millichap data.

That had a small effect on rents. Based on increased demand, landlords were able to charge tenants 1.9 percent more per month, about $20 more for a $1,000 apartment. Rents vary widely based on location and the size of the unit.

Now it is harder to predict these trends. Job creation was weaker in the Inland area in March and April.

The job market has affected apartment dwellers’ decisions, said Alex Garcia, senior vice president for investments at Marcus & Millichap’s Ontario office. The company, which engineers sales of apartment complexes, said rentals close to logistics hubs are attracting tenants.

That’s promising news to a landlord in Moreno Valley or Ontario, but an owner in Hemet might face a much higher vacancy rate and be forced to take less money.

Also, a person who is living in a great pad in Moreno Valley might think of moving, or at least not signing a long-term lease, if his or her job is in Orange County. Corona might work better, Garcia said.

“Maybe people who live in Riverside or Moreno Valley and drive to work in Orange County or Los Angeles want to be closer,” Garcia said. “We’ve seen that happen in the past, to a degree, but when gas gets so close to $4.50 a gallon, it really starts to pinch people.”

Randall Lewis, principal of Lewis Apartment Communities, an Upland-based developer, is in the process of renting a high-end apartment project in Rancho Cucamonga called Santa Barbara, and he has plans or permits to build about 1,500 more units in that city, Chino and Chino Hills.

Lewis also has set his sights on apartment development in some Riverside County cities along the Interstate 15 corridor that have lower unemployment levels, believing that there’s a market.

“And it will continue to be there when the jobs come back, whenever that is,” Lewis said. “Certainly there will be a lot of opportunities.”

The Marcus & Millichap market report states that younger, would-be homeowners are willing to pay high-end rents while they wait for the residential real estate market to stabilize fully. That would ensure they don’t buy into negative equity situations.

Lewis agreed with that assessment, saying he knows of renters with incomes higher than $80,000.

“A lot are renting by choice,” Lewis said. “They want stability.”

Nicole Roberts, who managers Monroe Manor Apartments, a 30-unit complex near California Baptist University in Riverside, said most of the residents still fit the recession profile. There are people who have lost their homes to foreclosure, and others who had job issues and moved in with relatives.

“”There are a lot of multigenerational households, where grandparents live with children, or their children’s children’s children,” Roberts said.

That kind of demand, and the small size of Monroe Manor, plays in its favor. The complex is fully occupied, Roberts said.

According to a recent report from RealFacts, a Novato-based research firm, the typical Inland-area studio apartment would cost a tenant $745 a month in the first quarter, $12 more than the previous quarter. The average rent for a one-bedroom place was $960 and $1,019 for a two-bedroom, one-bath apartment, with both of those rents up about $10 than the fourth quarter of 2011.

Landlords are able to adjust rents according to other factors beyond work location. Del Flora Apartments, a 152-unit complex in Redlands, is 96 percent leased and draws a lot of families including foreclosure victims because it is close to some well-regarded schools, manager Christina Rios said.

Stonegate at Towngate is one of Moreno Valley’s largest complexes and located in a city that has been slammed by the recession and foreclosures. People who have lost homes make up a large share of the community’s tenants, said Sherrie Mares, the manager.

And, because so many detached homes are now being rented, it is that much harder to attract tenants. Stonegate at Towngate, located just south of the city’s major mall, has a vacancy rate that’s a little higher than the Inland average. Mares said she uses the amenities, including things such as cooking classes and hydrotherapy spas, to attract tenants.

“There are a lot of foreclosures for rent, sometimes for less than an apartment,” Mares said. “So we try to make up for that by selling a lifestyle.”

Rental realities

You can pay a fairly high sum for an apartment in some Inland cities. Others are much cheaper.